The onward march of article 11 injunctions - From cyberspace to marketplace

Introduction

Hot on the heels of the Court of Appeal’s support for blocking injunctions in Cartier v BskyB comes another significant judgment, this time from the European Union's Court of Justice (ECJ), which promises to be a blessing for brands but a burden for companies operating physical markets.

Background

The Czech Republic’s Supreme Court is currently hearing the case of Tommy Hilfiger Licensing LLC and Others v Delta Center. Delta is the tenant of a Prague marketplace, whose various pitches it sublets to market traders. The claimants have taken Delta to court to try to prevent it from subletting to vendors stocking counterfeit versions of their branded products.

The claimants’ argument centres squarely on Article 11 of the Enforcement Directive. For them, the key element is the article’s third sentence:

 “Member States shall also ensure that rightholders are in a position to apply for an injunction against intermediaries whose services are used by a third party to infringe an intellectual property right […].”

Last September the Czech Supreme Court asked the Court of Justice to clarify whether companies like Delta qualify as "intermediaries" in this context, and whether rightholders can therefore seek injunctions against them. The Court of Justice, in its judgment dated 7th July, has now provided a clear affirmative response on both counts.

The decision

The L’Oréal case (C-324/09) has already made it clear that Article 11 can apply to an online market operator; the question, therefore, is whether it should apply equally to an offline one. The Court’s decision confirms that the situations are equivalent.

Delta performs an essentially identical role to an online market operator, albeit on the street. The key features of the Article 11 sentence are all still met: Delta’s activities, which consist of subletting pitches to stall-holders, clearly constitute a provision of services; meanwhile, some of its users are known to be infringing IP rights. The directive does not distinguish between online and offline commerce in this context, and so there can be no reason to apply a higher standard to one than the other.

Likewise, the injunctions that claimants can seek against companies like Delta are subject to identical conditions and principles to those identified by L’Oréal in an online context. They must be effective and dissuasive, fair and proportionate, not excessively costly and must not create barriers to legitimate trade. Provided these conditions are met, however, courts can order intermediaries to take measures not only to end existing IP infringements, but also to prevent further infringements of the same kind.  Whether the particular intermediary in question operates in an online or offline sphere is essentially irrelevant.

Practical implications

Although this ruling relates to a Czech case, it is certain to have pan-European consequences. The national courts of all Member States (including, at present, those of the United Kingdom), even if the state in question has not adopted specific legislation to implement the relevant part of Article 11, must nevertheless apply national laws as far as possible in light of its wording and purpose.

This important principle has already been spelled out by both the Court of Justice in L’Oréal and the UK Court of Appeal in Cartier, judgments which promoted the use of injunctions against online marketplace providers and ISPs respectively. Now this latest decision of the EU’s highest court will further extend Article 11’s powers to encompass physical marketplaces.

This judgment is good news for brands like Tommy Hilfiger, particularly so given that it follows a string of cases highlighting the heightened judicial support for the tackling of IP right infringements. On the other hand, marketplace operators like Delta will undoubtedly feel added pressure, as a larger share of the burden of tackling counterfeit sales is transferred to their shoulders.